The spot price of gold has stalled around the $1,700 mark after dipping over 1% on Tuesday and subsequently recovering as central banks announced plans to expand monetary stimulus, as investors await the Federal Reserve’s policy statement on easing restrictions.
Spot gold is currently trading at about $1,707 after dropping 0.1% in the last 24-hour period . The precious metal has been trading around the $1,710 mark for well over a day as the U.S. dollar has slipped to a two-week low, but investors await a policy statement from the country’s central bank on how it intends to leave interest rates near zero.
Julius Baer, analyst at Carsten Menke, noted that there are countries planning to ease lockdown measures, which is pressuring the price of gold. However, the analyst added the economy is still in good shape:
There is sufficient fundamental support from safe-haven demand, but no panic-buying, although the uncertainty regarding the virus and also the economy remains too high for gold to really lose ground. All in all, this keeps prices around the $1,700 level.
Several countries throughout the world have started tiptoeing out of lockdowns and some parts of the United States are now looking to restart businesses. Oil prices jumped this week as demand is expected to grow as restrictions are lifted.
The Federal Reserve, which has so far responded to the crisis by slashing interest rates, resuming bond-buying and backstopping credit markets, is expected to issue a policy statement later today on its current stance on interest rates being near zero.
Gold, it’s worth noting, tends to benefit from widespread stimulus measures as it’s often seen as a hedge against inflation and currency debasement. In the long-term, investors remain bullish on gold as central banks increasing liquidity and interest rates remaining low is positive for the precious metal.
The Bank of Nova Scotia (Scotiabank) recently told staff it would close its metals business, which could be pressuring the price of gold to go down.
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